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The Asia Law Profiles have ranked CTL Strategies as the leading law firm in the areas of taxation in the Maldives. It has also recognized us as the highly recommended firm in the areas of litigation and disputes.

The team at CTL Strategies has been praised by their clients as “dedicated and professional” in representing them in foreign investment and, cross-border taxation matters. The firm has a notably stellar reputation amongst local and multinational businesses in the Maldives, for managing and handling tax controversies and corporate litigation.

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COVID-19 and Voluntary Liquidation

by Hassan Shah

As the novel coronavirus (COVID-19) has spread globally and its effects continue to unfold, markets continue to collapse on a daily basis all around the world. In the efforts to contain the spread, governments have introduced containment measures including orders to close down and significantly curtail business operations.

As a result, both locally and globally, a vast swathe of businesses are struggling to keep afloat. Hence, although the businesses have the option to consider seeking the help of the government’s Economic Recovery Package1  to sustain their operations, rather than seeking vindication through the government announced such stimulus packages, there might be cases where some companies opt to file for voluntary liquidation. This blog post summarises the procedures under Maldivian laws to file for voluntary liquidation of a company. Further, a summary of the voluntary liquidation procedure is provided, that has to be followed during a circumstance of voluntary liquidation.

What is Voluntary Liquidation?

Liquidation or winding up is the process by which a company’s existence is brought to an end2 , the assets of the company are brought into a liquid form, and the proceeds are distributed to those entitled. Voluntary liquidation is one of such winding up processes that does not involve court proceedings, i.e. is not made compulsory upon the company, and is instead instigated by the shareholders of the company.


When may a company be voluntarily liquidated?

A voluntary liquidation of a company may be initiated for a number of reasons. Some of the most common reasons for voluntary liquidation includes:

  1. the company becomes insolvent. i.e., when the company does not have enough cash or assets that can settle the day-to-day liabilities or short or long term liabilities when they are due.
  2. the objectives, for which the company was formed is achieved.
  3. the shareholders are unable to work together and it is no longer civil to continue with the business

Liquidation process due to the insolvency may be either initiated by the directors of the company or by the creditors and can be determined by carrying out the following tests3:

  1. Cashflow/Commercial Insolvency Test – this test is carried out to confirm whether there are creditors who are not being settled on time;
  2. Balance Sheet Insolvency Test – this test is carried out to confirm whether the liabilities of the company is more than its assets.

COVID-19 and Voluntary Liquidation

As stated above, the directors of the company may opt to liquidate the company on a voluntary basis when the company is facing solvency issues. The probability of such an election is high during the pandemic, due to the cash flow issues compared to a normal functioning economy where the outcomes are predictable to an adequate level. 

Some of the companies may have a wide range of investments that may not have been victims of COVID-19, while some of the companies may be responsive to the market shift and strategies as required. We are currently witnessing the businesses moving towards a wireless operation, such as colleges and universities conducting classes by electronic learning methods. While some of the businesses are moving towards penetration to new markets, divestments or introduction of new products/services that fit their existing portfolios. 

As the businesses are usually inter-related to each other, an impact on a single business sector can have serious implications on the businesses by creating a snowball effect and affect the stakeholders who are associated down the chain. For example, a closure of a guest house business that has a main target customer base of foreigners, will have an impact on tour operators, employees, freelance service providers such as filmmakers and photographers and consultants. Thus having an impact on an individual’s disposable incomes, revenue and cash flow of the businesses.

Process of Voluntary Liquidation

The liquidation process in the Maldivian context can be summarised as follows. 

  1. The board of directors passes a resolution to liquidate the company and subsequently the shareholders pass a special resolution concurring to the decision board of directors.
  2. The liquidator makes a public announcement of the initiation of the liquidation and notifies the MIRA of the same.
  3. Upon the completion of liquidation proceedings, the liquidator presents a report on the liquidation undertakings to an extraordinary general meeting of the shareholders. During the general meeting, the shareholder may accept the liquidators report and pass a special resolution. The decision is then communicated to the Registrar of Companies.

Tax Clearance

From 11 February 2020, companies are no longer required to submit a tax clearance report issued by the Maldives Inland Revenue Authority (MIRA), along with the liquidators report. This information is obtained by the Ministry of Economic Development (MoED) directly from the MIRA further to the submission of the Liquidator’s Report. Even though the process of obtaining the tax clearance report has changed, the company being liquidated should clear all the taxes and related payments, only after which the Registrar of Company will allow the liquidation of the company.

Upon the initiation of the liquidation process, the company ceases its business operation, except so far as may be required for its beneficial winding up. All the responsibilities of the company, including representing the legal cases, disposal of assets, settlement of liabilities, filing of tax returns should have to be carried out by the liquidator.

Who gets affected?

The decision to liquidate the company will have an impact on the internal and external stakeholders of the company. Below are some of the stakeholders who will be significantly affected during a voluntary liquidation due to insolvency: 

  1. Shareholders – in privately held companies, the shareholders will be held liable up to the amount of share capital owned by each individual in the company. No individual should be held personally liable. 
  2. Employees – the Employment Act3 provides for the process which must be adhered to when dealing with the employees of a company whose employment are terminated as a result of the liquidation of the company.
  3. Creditors – insolvency may leave the creditors of the company with outstanding thereby causing cash flow issues for the creditors as well.

Who is paid and when?

A liquidation initiation due to the insolvency or unavailability of adequate liquid cash resources, the chances that some of the debts being unsettled is high. Upon the disposal of all the assets, the liquidator is required to settle the debts in the following order4:

  1. Remuneration of the liquidator;
  2. Payments due to government bodies or authorities;
  3. Salary/wages due to the employees (excluding directors) for three months;
  4. Balance payment should be shared on pari passu basis among the remaining debts.

It is important to note that the stakeholders may not be paid in full or to an adequate level, as a voluntary liquidation due to insolvency occurs due to cashflow issues and the fact that each of the shareholders in a limited liability company will be responsible for only to the extent the person invested in the company as shares value.


Liquidation process can be a lengthy process that may take months to complete due to the involvement of multiple stakeholders who might have claims and various filing and compliance requirements from the authorities. Ideally, board of directors are expected to discharge the responsibility to discharge the fiduciary duty to act on behalf of the shareholders and run the business in a smooth manner.

Some of the proactive steps that the directors can take includes:

  • Conducting a periodic testing for insolvency;
  • Reviewing the payable amounts towards government entities;
  • Going for economic relief packages introduced;
  • Minimising/deferring recurrent expenses and halting the investments;
  • Carrying out of cost/benefit analysis of business segments and projections

As we may see a number of companies opting to voluntarily liquidate, we suggest all relevant stakeholders to keep a lookout for public notices on the liquidations, and take necessary steps to ensure that their rights are protected before its late.

If you need our assistance with respect to any matter related to the above, , please get in touch with one of the following members of our team to talk through how we can support you.

Hassan Shah

Senior Associate

[email protected]

Mariyam Naufa


[email protected]


Details of the Economic Recovery Package are available here.
The business of the company may need to be carried on temporarily as part of the winding-up process
Husnu Al Suood (2009: 191) Understanding Maldivian Companies Act
Law Number 2/2008
Section 91 of the Companies Act (Law Number 10/96)

COVID-19: Tax Considerations for Individuals & Businesses

by Zaina Zahir

As the COVID-19 pandemic continues, businesses and individuals will inevitably undergo its unprecedented impacts. The income fallout of the reduced economic activity, coupled with taxes and fees that oblige regular payments, may even call for a liquidity crisis for many at this juncture. Hence, policymakers around the world are welcoming a whole raft of measures as they navigate through this crisis, including tax relief measures devised to help the most affected.

With this in perspective, this post will present to you the reliefs and payment options that are currently available to taxpayers in the Maldives.

Deferment of Payments and Return Filing Deadlines

From 15 April 2020 onwards, the greater Male’ area has been on lockdown in an effort to control the community spread of the disease. As a result, Maldives Inland Revenue Authority (“MIRA”) has announced that any deadlines falling within this period will be extended until the first working day following the lockdown as their office will be closed during the period. This includes deadlines with respect to filing tax returns and payment of taxes, land rent and fees or other charges paid to the MIRA. MIRA is yet to announce its reopening date.

What this means for you is, if you are unable to meet the statutory deadlines within this period of lockdown, you will get more time to file and pay what you owe – interest-free and penalty-free. You do not need to file for an extension individually- the extension applies to all taxpayers automatically.

However, if you are able to meet your payment and filing obligations, you may do so via the MIRA’s online portal, MIRAConnect.


Instalment Plans

The MIRA has also announced that ‘special arrangements’ are available for taxpayers who wish to enter into an instalment agreement with MIRA to pay its outstanding taxes, subject to certain conditions.

While MIRA has always had an established procedure to go through when entering into an instalment arrangement, on 1 December 2019 – prior to declaration of the Public Health Emergency – MIRA had amended its Enforcement Policy, incorporating more lenient commitment payment rates and payment schedules for eligible taxpayers that apply for an instalment plan between 1 December 2019 and 29 February 2020. Hence, what MIRA has effectively done through its announcement on 25 March 2020 is that it had extended the availability of the ‘special arrangement’ until 30 June 2020 – giving the taxpayers more time to apply for an instalment plan and utilise the special commitment payment rates and payment schedules. Details of payment options available, as per the announcement, can be found here.

What must be taken into consideration is that this option is only available for tax payments, meaning, payments related to Business Profit Tax, Income Tax, Goods and Services Tax and Green Tax, etc. This does not apply for non-tax payments such as tourism land rent. Tourism land rent is a levy imposed under the Maldives Tourism Act, thus, requests for relief with respect to payment of tourism land rent must be directed to the Ministry of Tourism.

If you are opting for an instalment plan to ease the difficulties faced in meeting the tax payment deadlines, do keep in mind that interest and payment fines will still accrue. However, you will have the option of requesting for fine relief through the submission of MIRA 910 Form. This is a separate process and there is no publicly available policy on it. MIRA will base its decision on its internal policy and inform you of its decision.


Follow our COVID-19 Resource Center

As the situation unfolds, new extensions, deferrals and reliefs for individuals and businesses are expected to be announced by the respective authorities. You can follow these developments and how they can impact you or your business from our COVID-19 Resource Center which brings together important information and updates relating to taxes and other fees.




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